Ofcom sets UK LTE auction for late 2012, but operators could challenge rules

The UK will auction LTE spectrum by the end of the year with the expectation that operators will launch commercial service in 2013.

The telecoms regulator Ofcom has issued guidelines designed to promote competition and extend coverage, while reserving some of the frequencies for a fourth national wholesaler other than the three largest operators.

While Ofcom has been forced to consult on the rules twice to ensure the fewest objections to these latest rules, UK operators could still mount legal challenges as to how the auction is structured and delay the auction further.

The auction will be for two bands, the 800MHz  and 2.6 GHz bands, and the spectrum bands will have a combined reserve price of £1.4 billion.

The Financial Times suggests that the established operators could object to some of the LTE spectrum being reserved for a fourth operator--widely seen as offering protection to 3UK.

3UK has protested in the past that it would likely be squeezed out of the auction by the financial might of Vodafone, Telefónica's O2 UK and Everything Everywhere.

The telecoms regulator first opened consultations on LTE spectrum auctions four years ago, but protests from operators have impeded progress to the extent that the UK is now lagging behind many other developed countries in deploying LTE.

Ofcom said that this spectrum auction would be the largest ever sale of frequency bands for mobile services in the UK, and equivalent to three-quarters of the mobile spectrum in use today, reported the Financial Times. This is about 80 per cent more than released in the 3G auction in 2000 and should lead to mobile broadband coverage for 98 per cent of people across the UK.

The proceeds from this latest UK auction are likely to raise a fraction of the £22.5 billion achieved from the 3G auction in 2000, with the Financial Times reporting £2 billion as a possible total.

Commenting on the Ofcom announcement, Matthew Howett, practice leader of telecoms regulation and policy at Ovum, noted that the increased overage obligation for one of the 800MHz licence holders is set to bring at least 2Mbps mobile broadband to virtually all of the UK population by the end of 2017.

"By focusing on indoor coverage it has the added benefit of improving outdoor coverage," he said. "However, consumers in some parts of the country may for a time only have the choice of the one provider, since no access obligation has been imposed on the winner of this licence."

In regard to the possibility of the three major operators issuing a legal challenge, the Ovum analyst said: "In taking its time to get to this stage Ofcom will be fairly confident they have dotted all the i's and crossed all the t's so that in the event of any challenge they will come out on top and be able to get the auction back on track."

Meanwhile, Everything Everywhere is still waiting for Ofcom to approve its plan to refarm its 1800Mhz spectrum for LTE. Ofcom is expected to continue to work on the application through August. Everything Everywhere CEO Olaf Swantee told Bloomberg that the company's plans to launch LTE using the spectrum by the end of the year might be in jeopardy and said "we need to have the liberalisation during the summer months."

For more:
- see this Ofcom site
- see this Reuters article
- see this Financial Times article (sub. req.)
- see this BBC article
- see this Daily Telegraph article
- see this Bloomberg article

Related Articles:
Mallinson: Spectrum licensing remains the key to LTE deployment
UK broadcasters: £180M not enough to combat LTE interference
Everything Everywhere could unleash bidding war with LTE spectrum sale
UK's Ofcom mulls 700MHz auction to sidestep mobile data jam
Everything Everywhere gets approval to refarm 2G spectrum for LTE
Virgin Mobile UK shocks rivals with LTE auction interest